May 2018 IT Industry News

A Little History of May in previous years

Five years ago, in May 2013, Yahoo purchased Tumblr for $1.1 billion. However, the $6.9 billion deal to take BMC Software private did not cause the same kind of splash – the power of the brand in action? Manitoba Tel decided to shed its Allstream division to a holding company for $520 million; McAfee paid $389 million for Finnish security firm Stonesoft; Dell added to its cloud capabilities with the purchase of Estratius; AVG bought PrivacyChoice; and Ottawa based N-Able Technologies became one more Canadian company to be bought by a larger US company, this time by Solarwinds for $120 million.

In May 2014, AT&T paid $50 billion for DirectTV and Apple paid $3 billion for Beats. Google continued to invest in its Android strategy this time with a strategy company called Divide, which would bring help breaking into the enterprise. Other acquisitions saw Seagate pay $450 million for some flash capability from Avago (the LSI divisions); GE bought cyber security firm Wurdtech; EMC bought a flash (see the trend) start-up DSSD; Time Warner bought YouTube video network FullScreen; and SAP bought behavioral target marketing company SeeWhy.

May 2015 saw some very large deals on the M&A front, with the biggest seeing Charter Communications spend $55 billion to buy Time Warner Cable and a further $10.4 billion to buy Bright House Networks. This created the second largest cable company in the US, just behind Comcast. The “”billion-dollar club”” also saw French telecom company, Altice pay $9.1 billion for another US cable company Suddenlink Communications. Keeping with the billion-dollar deals involving telcos, Verizon paid $4.4 billion for AOL to bolster its mobile video capabilities. Another billion-dollar deal saw HP unload 70% of its stake in its China server, storage and technology storage unit to Tsinghua Holdings for $2.3 billion. The final billion-dollar deal saw EMC pay $1.2 billion for cloud service provider Virtustream. Apple was out buying a couple of companies in May 2015, snapping up mapping company Coherent Navigation and augmented reality company Metaio. In other deals, Avaya bought cloud technology company Esna and Cisco bought cloud programming interface company Tropo.

May 2016 saw some M&A activity with the largest deal seeing HPE merge its services arm with CSC in an $8.5 billion deal to create arguably the largest IT services company. In another large deal Vista Equity Partners paid $1.79 billion for customer service and marketing cloud provider Marketo. There were some other big names out shopping in May too. Oracle paid $532 million for software as a service for the utilities vertical, company Opower; Google picked up interactive training platform Synergyse; Infor bought consulting services company Merit Globe AS; and ARM paid $350 million for imaging and embedded systems company Apical. Microsoft ended an unhappy period by divesting its feature phone business to FIH mobile for $350 million, and GoDaddy picked up cloud-based phone company FreedomVoice for $43 million. New Signature picked up another Microsoft solution provider, Dot Net Solutions; and Edmonton based F12 bought Calgary-based professional services company XCEL.

The most significant purchase in May 2017 was the $1.86 billion sale of CenturyLink’s data centres and colocation business to a consortium led by BC Partners, Medina Capital Advisors and Longview Asset Management. Cybersecurity startup, Hexadite, was bought by Microsoft for $100 million. Goldman Sachs entered the BI space by purchasing a minority stake in Information Builders of New York City. Apple acquired Beddit, a Finnish sleep sensor product, for an undisclosed amount. Finnish cybersecurity firm, F-Secure acquired British security consultants, Digital Assurance also for an undisclosed amount.

Which brings us back to the present

May 2018 was a very active month for M&A activity, with Microsoft’s $7.5 billion purchase of GitHub leading the pack in size. Microsoft also bought AI company Semantic Machines. PayPal paid $2.2 billion for European payments company iZettle; Recruit paid $2.1 billion for Glassdoor; Investment firm KKR paid $2 billion for BMC Software; and Office Depot paid $1 billion for CompuCom. Other big names out shopping saw Oracle buy collaboration platform Datascience.com; Google bought cloud migration startup Velostrata; HPE bought Plexxi; Rackspace bought RelationEdge; and Splunk bought Phantom Cyber Company. There were a number of other deals, perhaps too many to mention.

In a display of how careful we need to be online these days, two Canadian banks, BMO and CIBC Simplii Financial announced online breaches by hackers who were holding them ransom.

On the economic front the US continues its march, posting strong job numbers and many positive indicators. Around the world the job numbers for most countries were generally positive.

Here in Canada, Amazon announced an investment in Vancouver that will generate up to 3,000 jobs. Employment numbers were little changed from March and GDP growth was relatively weak.

That’s it for what was happening in the technology space over the last month, compared to the same month in previous years.

In this Issue:

> General Interest
> Company News
> Merger & Acquisition Activity
> Primary Sources


> GENERAL INTEREST

The economy – Canada

Canada’s real GDP rose 0.3% in the first quarter following increases of 0.4% in each of the previous two quarters, Statistics Canada reported. Expressed at an annualized rate, real GDP rose 1.3% in the first quarter; in comparison, real GDP in the US rose at an annualized rate of 2.2% in the first quarter. Growth was moderated by a deceleration in household spending, lower exports of non-energy products and a 1.9% decline in housing investment.

Amazon announced it would be expanding its Vancouver operations to the tune of 3000 new jobs. The Seattle-based tech giant’s Vancouver-based development centre will be seeking workers in e-commerce technology, cloud computing, and machine learning for its 416,000-square-foot space.

Canada’s business leaders are becoming more pessimistic about the state of the Canadian economy, according to The Conference Board of Canada’s Index of Business Confidence. The index fell 6.9 points to 93.1 in the first quarter, the lowest level in the last six quarters. The research found businesses do not expect the rapid sales growth they saw in 2017 to continue. They stated concern about the impact of government policy on business competitiveness and about the availability of labour. Business leaders also reported increased concern about the competitiveness of the Canadian economy in the face of US tax cuts, a weak Canadian dollar, and an uncertain future for NAFTA.

Employment in Canada was little changed in April, edging down by 1,100 jobs from March to a total of more than 18.6 million jobs, according to seasonally adjusted numbers from Statistics Canada. A loss of 30,000 part-time jobs in April offset a gain of 28,800 full-time jobs. On a year-over-year basis, April employment increased by 278,300 jobs on a gain of 378,300 full-time jobs and a loss of 100,000 part-time jobs.

The Canadian staffing index, which measures staffing activity in Canada, rose 8% in April on a year-over-year basis to a reading of 107. “”April’s strong year-over-year growth can be largely attributed to the greater number of working days this year”,” said Maxim Kupfer, research analyst at Staffing Industry Analysts. “”There were two additional working days this month compared to last year”.” On a month-over-month basis, the index rose 2% in April.

The economy – US

 US private sector employment rose by 178,000 jobs in May from April as finding workers became increasingly difficult, according to the ADP National Employment Report. April’s gain was revised downward to 163,000 from the initially reported 204,000.

The Conference Board’s consumer confidence index increased in May, following a modest decline in April. The index rose to a reading of 128.0 (1985=100) from 125.6 in April. “Consumers’ assessment of current conditions increased to a 17-year high (March 2001, 167.5), suggesting that the level of economic growth in Q2 is likely to have improved from Q1,” said Lynn Franco, director of economic indicators at The Conference Board.

The US topped the list for the most competitive economies in the world, pushing out the previous leader Hong Kong, to the number two position, according to the IMD World Competitiveness Rankings. The top five countries in order are the US, Hong Kong, Singapore, the Netherlands and Switzerland.

GDP will expand by a strong 2.9% in 2018, according to the “The Forecast of the Nation” released by the Economic Forecasting Center at Georgia State University’s J. Mack Robinson College of Business. The GDP will then moderate to 2.4% in 2019 and 1.8% in 2020, according to the forecast. The forecast expects job growth to remain at about the same level in 2018 due to a slight pickup in business investment. Jobs will grow by a monthly rate of 180,200 in 2018 before softening to 158,700 in 2019 and 111,800 in 2020.

More CEOs are “very confident” in the growth of their companies over the next three years and a narrow majority believe artificial intelligence and robotics will create more jobs than they destroy, according to the new “US CEO Outlook” survey from accounting firm KPMG.

Month-over-month, the ASA Staffing Index edged down 0.1%, but remained at a rounded reading of 97 for the week. This marks the best reading for this particular week since the start of the ASA Staffing Index in 2006 and continues a streak that began in April of record-high readings for the comparable week.

The Conference Board’s Employment Trends Index increased again in April, after improving in March. The index rose to a reading of 108.08 in April, up from a downwardly revised reading of 107.37 in March. “In recent months, the Employment Trends Index continued to improve, signaling that employment growth will remain solid through the summer.”

Economic activity in the manufacturing sector expanded in April but at a slower pace than in March, according to the Institute for Supply Management’s purchasing managers index for US manufacturing. April’s index reading was 57.3, down from March’s reading of 59.3. Any reading above 50% generally indicates improving conditions

The Conference Board’s US Leading Economic Index edged up 0.4% in April to a reading of 109.4 (2016 = 100), following increases of 0.4% in March and 0.7% in February. April’s increase and continued uptrend in the US Leading Economic Index suggest solid growth should continue in the second half of 2018.

Real GDP for the US increased 2.9% in the fourth quarter of 2017. MarketWatch’s poll of economists had forecast GDP would be unchanged. It attributed the slowdown mainly to a slower buildup in inventories and reported the revised first-quarter report doesn’t change anything in the big picture. All signs point to faster growth in the spring, with economists predicting GDP is likely to top 3% for the third time in the past five quarters.

The economy – Outside North America

Egypt is seeing an increase in demand for contract professionals, according to data from 6CATS International, a supplier of contractor management solutions. Between January and May 2018, Egypt saw a 73% increase in contract professionals working. Furthermore, the increase is equally split between local professionals and European nationals.

Germany’s labour market barometer stood at 104.1 in May, down by 0.4 points when compared to last year, according to the Institute for Employment Research. The barometer stated that both the employment and unemployment outlook are dampening, however the barometer remains at a high level which shows good prospects for the labour market in the coming months. According to figures from Eurostat, the unemployment rate in Germany stood at 3.4% in March.

The Japanese seasonally adjusted unemployment rate stood at 2.5% in April, down from 2.8% last year, according to figures from the Statistics Bureau of Japan.

The number of unemployed persons in April 2018 was 1.80 million, a decrease of 170,000 or 8.6% from the previous year.

The progression of digitization, as well as changing demographic trends, are some of the biggest challenges in the Swiss labour market, according to a study from the Adecco Group Switzerland and the University of Zurich. The study focuses on skills shortages in Switzerland and found that, with the rapid progression of digitization as well as an ageing workforce, Switzerland could face a labour shortfall of around half a million workers by 2030.

The jobless rate in Malaysia fell to 3.3% in the first quarter when compared to 3.5% during the same period last year, according to figures from the Department of Statistics Malaysia.

Skills shortages in the STEM (Science, Technology, Engineering and Mathematics) sector is costing UK businesses £1.5 billion a year in recruitment, temporary staffing, inflated salaries and additional training costs, according to a new report from STEM Learning, a provider in STEM education and careers support. The report found that 89% of STEM businesses have found it difficult to hire staff with the required skills in the last 12 months, leading to a current shortfall of over 173,000 workers, or an average of ten unfilled roles per business.

Taiwan’s seasonally adjusted unemployment rate rose by 0.02% in April to 3.69%, according to data from the Directorate-General of Budget, Accounting and Statistics.

The number of unemployed in April stood at 431,000 in April 2018, which decreased by 1,000 when compared to the previous year.

The unemployment rate in the Philippines for 2017 fell to 5.7%, but still missed its target of 5.1% to 5.4%, according to a press briefing from the National Economic and Development Authority. In 2017, the country aimed for a 49.3% women participation but fell short by 3.1%.

China’s monthly surveyed unemployment rate in urban areas stood at 4.9% in April, down 0.1% from last year, reports Xinhuanet, citing data from the Chinese National Bureau of Statistics.

The jobless rate in South Africa remained at 26.7% for the first quarter of the year, unchanged from the previous quarter, according to the results of the Quarterly Labour Force Survey by Statistics South Africa.

The seasonally adjusted unemployment rate in March was 8.5% in the 19-country euro area; that’s down from 9.4% a year ago and the lowest jobless rate since December 2008. Countries with the lowest unemployment rates includes the Czech Republic, Malta and Germany. The highest rates were in Greece and Spain. Looking at all 28 countries in the European Union, the unemployment rate was 7.1% in March, down from 7.9% a year ago. It was the lowest rate since September 2008.

Strong job growth and falling unemployment point to a tighter job market in Mexico, according to an update on the Mexican economy by the Federal Reserve Bank of Dallas. Formal sector employment in Mexico — jobs with government benefits and pensions — grew at an annualized rate of 2.9% in March and is up 4.3% year to date (annualized). The unemployment rate for Mexico was 3.2% in March, down from 3.5% a year earlier. Looking to the overall economy, Mexico’s gross domestic product grew at an annualized rate to 4.5% in the first quarter – its highest quarterly growth since mid-2016.

The seasonally adjusted number of people employed in Australia rose by 22,600 in April from March to a total of approximately 12.5 million. However, the monthly unemployment rate increased 0.1 percentage points from the previous month to 5.6%.


> COMPANY NEWS

The Bank of Montreal and CIBC’s Simplii Financial online bank said they are investigating apparent breaches of customer information, each apparently involving tens of thousands of customers. The CBC said several news services had received an email apparently from the hackers, who said they were demanding $1 million in cryptocurrency or customer names and information would be publicly released. CBC said to prove the legitimacy of the threat, the email included unencrypted customer names, social insurance numbers and answers to security questions that allegedly were stolen. The email also outlined how the attackers were able to breach bank defences.


> MERGER & ACQUISITION ACTIVITY

Microsoft paying $7.5 billion for GitHub

Microsoft is paying $7.5 billion to acquire GitHub, the world’s leading software development platform where more than 28 million developers learn, share and collaborate to create the future. Together, the two companies will empower developers to achieve more at every stage of the development lifecycle, accelerate enterprise use of GitHub, and bring Microsoft’s developer tools and services to new audiences. GitHub will retain its developer-first ethos and will operate independently to provide an open platform for all developers in all industries. Developers will continue to be able to use the programming languages, tools and operating systems of their choice for their projects – and will still be able to deploy their code to any operating system, cloud or device.

Microsoft buying Semantic Machines

Microsoft has acquired Semantic Machines Inc., a Berkeley, California-based company that has developed a revolutionary new approach to building conversational AI. Their work uses the power of machine learning to enable users to discover, access and interact with information and services in a much more natural way, and with significantly less effort. With the acquisition of Semantic Machines, we will establish a conversational AI center of excellence in Berkeley to push forward the boundaries of what is possible in language interfaces. Combining Semantic Machines’ technology with Microsoft’s own AI advances, we aim to deliver powerful, natural and more productive user experiences that will take conversational computing to a new level. We’re excited to bring the Semantic Machines team and their technology to Microsoft.

PayPal paying $2.2 billion for iZettle

PayPal is paying $2.2 billion to buy iZettle, a European payments company that provides point-of-sale software and other services to brick-and-mortar shops.

The proposed deal, the largest in PayPal’s history, would give the company a stronger foothold in Europe and a real in presence brick-and-mortar retail where it will compete against companies like U.S.-based Square, which has executed well in building out a strong suite of financial services beyond its original point-of-sale system on its way to a market cap of more than $21 billion.

Recruit pays $2.1 billion for Glassdoor

Glassdoor has been acquired by Recruit Holdings for $1.2 billion in an all-cash transaction. Glassdoor is a leading job and recruiting company well known for providing greater workplace transparency. Recruit Holdings, a leading Japanese-based HR company, plans to operate Glassdoor as a distinct and separate part of its growing HR Technology business segment.

KKR paying $2 billion for BMC Software

Global investment firm KKR has signed a definitive agreement to acquire $2 billion enterprise software vendor BMC Software. The private equity firm will buy Houston-based BMC from an investment group that includes Bain Capital, Golden Gate Capital and Elliot Management. Terms of the deal were not disclosed. BMC went private in 2013 after being bought by Golden Gate and Bain in a deal worth $6.9 billion. The software company has more than 10,000 customers worldwide as well as 60,000 employees in 30 countries.

Office Depot’s paying $1 billion for CompuCom

Office Depot’s blockbuster $1 billion purchase of CompuCom is not like anything we’ve seen before. “Other office supply companies have tried this before. But they bought very small businesses, very small MSPs,” Ken Jackowitz, CompuCom’s chief product officer told CRN. “Where we differ is that we have 6,000 W2 technicians in North America. What’s so perfect about that is you’ve got the ability to get the scale of those same technicians across all levels of customers – enterprise, midmarket, SMB.” CompuCom operates 72 Solution Cafes in North America – walk-in help desks built on enterprise premises that Jackowitz likened to an Apple Genius Bar. Enterprise clients who may not take an interest in the Solutions Café offering could have a chance to leverage those same services in one of Office Depot’s 1,400 retail locations, he said.

Oracle buying DataScience.com

Oracle made a big move to make its cloud more attractive to data professionals with a deal to acquire DataScience.com. The Los Angeles-based startup, founded in 2014, built an enterprise platform on which data science teams can organize data, access computing resources, and execute model development workflows. The platform unifies data science tools, libraries and languages with cloud infrastructure with the aim of making it easier for data scientists to collaborate and push their work into production environments.

Google buying Velostrata

Google announced plans to acquire cloud migration startup Velostrata, which already has a strong stable of solution providers doing enterprise migrations for Google, AWS and Azure. The acquisition will let its cloud customers quickly move virtual machine-based workloads, such as large databases, enterprise applications, DevOps, and large batch processing, to and from the cloud. The technology will also give customers more control over where their data lives, either in the cloud or in a premise-based data center.

HPE buying Plexxi

Hewlett Packard Enterprise is betting on its agreement to acquire Plexxi to boost its hyperconverged solutions and composable infrastructure portfolio. Plexxi, a leading provider of software-defined data fabric networking technology, will help HPE further simplify hybrid IT for customers.

Rackspace buying RelationEdge

Rackspace® announced it has acquired RelationEdge®, a full-service Salesforce Platinum Consulting Partner and digital agency that helps clients engage with their customers from lead to loyalty by improving business process, leveraging technology, and integrating creative digital marketing.

Splunk buys Phantom Cyber Company

Former CEO and founder of Phantom Cyber Corporation expects the company to further expand into the security and IT market after being acquired by Splunk Inc. Splunk produces software for searching, monitoring, and analyzing machine-generated big data.

Apex Partners buying Experio

Private equity firm Apex Partners announced that it is poised to buy Expereo, a global managed internet and cloud access provider based in the Netherlands, from investment giant The Carlyle Group. Expereo has more than doubled earnings in the four years since it was purchased by Carlyle Group in 2014, and CEO Irwin Fouwels expects this to accelerate under the new owners.

Ultimaco buying Cryptography unit from Micro Focus

Ultimaco is looking to deepen its ties with top global banking and financial services players through its plan to purchase Micro Focus’s cryptography and key management business unit. The Aachen, Germany-based hardware security module (HSM) vendor said its intended acquisition of Atalla’s HSM and enterprise secure key manager (ESKM) business lines will help address increasing demand for merging payment functionality with general purpose needs as items like cars and watches become payment devices.

NexusTek merging with Breakthrough Technology Group

NexusTek and Breakthrough Technology Group have merged, the latest in a series of mergers and acquisitions that have rolled up several managed service providers into one of the nation’s largest MSPs. NexusTek’s acquisition of Breakthrough Technology Group, or BTG, was unveiled mid-May, but the deal actually closed in April for an undisclosed sum. NexusTek’s latest deal is part of a move to build a national presence to take advantage of the kind of scale few MSPs can achieve, said Mike Jenner, CEO of the Denver-based company.

Kaseya buying Unitrends

Kaseya’s acquisition of Burlington, Mass.-based Unitrends is the culmination of a search for a good storage OEM partner that turned into an acquisition, said Fred Voccola, CEO of the Waltham, Mass.-based Kaseya. Before the acquisition, Kaseya was working with about 15,000 channel partners, while Unitrends had about 13,000 to 14,000 channel partners. Kaseya, with headquarters in New York and Miami, already has several other partnerships with storage vendors including Veeam and even Datto, and has an OEM relationship with Singapore-based Acronis, Voccola said. These relationships should not be impacted by Kaseya’s acquisition of Unitrends.


> PRIMARY SOURCES:

IT World Canada – http://www.itworldcanada.com/
TechRepublic –  http://www.techrepublic.com/
ZDNet – http://www.zdnet.com/
Information Week – http://www.informationweek.com/
Staffing Industry Analysts – http://www.staffingindustry.com/

 


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